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Labour Market Reforms in Portugal 2011-15

A Preliminary Assessment

This report, commissioned by the XIX Government of Portugal, provides an evaluation of the comprehensive labour market reforms undertaken in Portugal over the period 2011-2015. It describes reforms in the areas of employment protection legislation, unemployment benefits, activation, collective bargaining, minimum wages and working time. The report reviews the reforms in detail and assesses the available evidence on the impact they have had on the labour market. The report concludes that the Portuguese labour market reforms were a move in the right direction. However, despite the progress made, many challenges remain and some of the reforms may not have gone far enough. Unemployment remains high and this situation has fuelled an increase in both poverty and long-term unemployment The labour market remains highly segmented and, in the context of very low inflation, the presence of downward nominal wage rigidity is likely to remain a barrier to the competitiveness of the Portuguese economy – unless productivity growth is strengthened.

The Portuguese labour market reforms were a move in the right direction. Since economic growth turned positive again in early 2013, Portugal has experienced significant improvements in both employment and unemployment rates – greater, in fact, than what one would have expected given the pace of the recovery. However, despite the progress made, many challenges remain. Unemployment remains high (particularly among youth) and this situation has fuelled an increase in both poverty and long-term unemployment (although there are signs of improvement in the latter). The labour market remains highly segmented and, in the context of very low inflation, the presence of downward nominal wage rigidity is likely to remain a barrier to the competitiveness of the Portuguese economy – unless productivity growth is strengthened.